A Guest Post by Betty Parker of Your Ultimate Finance Destination blog
FHA loans or Federal Housing Administration loans are the simplest forms of mortgage loans for buying real properties. Among all mortgage loans, the eligibility criteria for an FHA loan are the easiest and necessitate lower than 5% down payment.
The FHA loans are totally backed by the Federal Housing Administration. Following are the fundamental eligibility criteria for an FHA loan:
- Your income for the past two years must be at the same level or rising
- You should have two years of stable employment, desirably with the same employer
- In the previous two years, your credit report must normally have lower than two 30-day delayed payments
- If there is any bankruptcy, it should be minimum two years back and you must have carried a good credit score afterwards
- If there is any foreclosure, it has to be minimum three years back and you should have carried a good credit score afterwards
- Your new mortgage payment must not be higher than 30% of your gross earnings
An FHA loan carries a number of advantages. Some of them are the following:
1) Down payment of 3%. FHA loans typically necessitate only a 3% down payment. The borrower can also receive the down payment as a gift that makes it even simpler to get an FHA loan.
2) Less overall expenditures. An FHA loan normally carries a lower interest rate; as a result, the total cost of the loan is reduced.
3) Simpler to qualify. Since FHA loans are insured by the Federal Government, the eligibility guidelines are less strict than traditional mortgage loans.
4) Preventing foreclosure. If you are undergoing significant financial problems, then the FHA loan programs can help you prevent impending foreclosure.
The eligibility criteria for an FHA loan may differ from one place to another on the basis of loan to value ratios and the loan restrictions in various counties. To verify whether you are eligible or not, the official website of HUD can work as an excellent resource.